Readers sound off on Social Security plan

President Bush's new Social Security plan is losing favor with the American people, according to a Washington Post-ABC News poll released Monday. Only about a third of those surveyed approve of the way he's handling the issue, while two-thirds are inclined to disagree with the plan as they become more aware of the details.

Yet Bankrate readers defy these statistics, judging from the feedback I received since running last week's column on the new Social Security plan -- and why it's a bummer for boomers. The subject sparks lively debate. Some readers agree with me, but many embrace the idea of personal accounts, if not for themselves then for future generations.

I was born in 1957 and I am in favor of the private accounts. I'm self employed and I have to match every penny I withhold for myself and for my employees. If I am allowed to withhold in a private account every dime I pay in, then I would have more than enough money. I have another reason why I like the private accounts. Any law that takes money control away from Congress is good for the people, because as you stated in your article, those SOBs don't know how to keep their grubby little hands off of the Social Security Trust Fund.

Any law that would prevent Congress from acquiring more money for their insatiable appetite is fine with me!
-- D.B.

[Note: I didn't call anyone an SOB, at least not overtly. And if we could withhold every dime we pay in, then these accounts would look a lot more attractive. But under the current plan, there are severe limits.]

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In response to your article on fixing Social Security: All this discussion of people in their 50s is interesting, but I think it deflects from the main issue. Sometime between now and 2042 Social Security will have an issue concerning the payment of benefits. The Congress has the option of changing the parameters: retirement age, tax cap, amount of benefit. Even FDR did not expect that Social Security would be enough to retire on.

You said in your column: "It involves taking a lot of risk for low expected returns, especially for boomers. Generation X and Y would fare better if market forces cooperated, thanks to the power of compounding."

I believe the above excerpt from your article, in a nutshell, explains why private accounts for future retirees who are in their 20s and 30s, like my two daughters, would benefit them, not me. The math works out over long periods and assumes the historic stock and bond market trends. The Federal employees, who work for me and you, can invest their "retirement funds" and get 6 percent. Why not us, their employers?

I would like to leave my Social Security account to my prospective grandchildren when the time comes. As you know, I can't do that now with Social Security. However, with the proposed approach, my daughters can leave their "Social Security" personal accounts to their children and their grandchildren.

As far as the estate tax is concerned, I don't know about you, but leaving 55 percent of my estate to the Feds, after I have already paid taxes once on it already, seems a bit much. Not reinstating it is also for my daughters' benefit and their children.

Raising the Social Security by raising the cap to unlimited levels only gives our politicians more incentive to spend and spend and spend as they do now.

I believe that our future families will benefit both from a strengthened Social Security system and an incentive to have assets of their own that the government can't control.
-- R.S.

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So, your idea of fixing Social Security is bringing back the estate tax, to double and triple tax families, and then give that money to the same people who you yourself admitted in your article as being fiscally irresponsible with Social Security surpluses since 1980 and think that those same irresponsible people are going to pay down any debt? You are brilliant! You should be in Congress yourself!
-- T.W.

[Thank you! Would you care to be my campaign manager?]

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Why didn't you do the calculations for the other end of the spectrum?

The boomers' children born in 1965 who divert $1,000/year of their Social Security taxes into personal accounts will have over $120,000 saved for retirement and it will provide a lot more income than the 2 percent return the rest of their Social Security contributions will give them.

The only logical argument against personal accounts for younger workers is that they will make the unfunded liability of current retirees immediately apparent and reduce the surplus available for funding the federal deficit.

I'm 59 and have been paying Social Security taxes for 43 years. I would gladly give up all the Social Security "benefits" Congress has "guaranteed" me if I and my children and grandchildren would never have to pay another penny into the Ponzi scheme we call Social Security. Since that's not very likely, the next best thing is to earmark as much of their benefits as possible for their own use.

-- Rick A. Cherye

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Where is the "security" in Social Security??? Where is the "insurance" in the Federal Insurance Contribution Act???

Creation of personal accounts would take a portion of the tax OUT of government hands and place it in the control of individuals, rather than Congress. This ownership program will protect the assets and enable the passing along to heirs or beneficiaries. Real security and insurance comes from ownership that is not dependent upon the action of government.

At ages of 79 and 75, my wife and I have been taking money from others for many years. Our daughters, age 52 and 50, would like to benefit from ownership rather than questionable government largess. Our grandsons, age 20 and 25, will with personal accounts create ownership and will not need the questionable "guarantee" of the present Social Security system. They are very supportive of the personal account idea.

In conclusion -- the less we rely on government and create ownership, the better off the nation will be.
-- Roger Lyle

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Your article was good and you make some good points; however, I disagree with some of your statements. Please read the following five points. (FYI: my background is accounting and I worked for the IRS for many years.)

1. I agree with your suggestion for cutting government spending. They shouldn't spend what they don't have. I guess that is a difficult concept for government people.

2. Since Social Security benefits are based on income earned up to a certain level, I believe that the problem will get worse by raising the $90,000 ceiling for Social Security taxation because even greater benefits would have to be paid to those making over $90,000. Avoiding that added problem would require jumping over a second hurdle of changing the formula that the Social Security Administration currently uses. And requiring those that make more than $90,000 to pay more and get less would not be a fair or equitable system.

3. Reinstating the estate tax would not have a large enough impact and we would be punishing one group of taxpayers to assist another group and that isn't the right thing to do. Undoing tax cuts for upper income earners would NOT reduce the deficit. This type of action is greatly misunderstood by many people and you may look up the figures.
During the 1980s when the tax rates were decreased, the Government brought in substantially MORE taxes than it did in prior years. Yes, the deficit increased, but only because of increased SPENDING.

If you look up the amount of revenue that was brought in during those years, you'll see huge increases but the spending outpaced the increased revenue. I believe that the recent tax cuts have actually helped us get out of a recession because tax cuts spur the economy. I believe that we would be in worse shape had the tax cuts not been made. (Spending is the key to our problems.)

4. If people "count on" Social Security for their retirement, they are going to be disappointed because the money just isn't there. The pyramid scheme (and that is exactly what the Social Security system is) would be illegal if it were run by anyone other than the government because, like all pyramid schemes, it is doomed to fail once there aren't enough people contributing compared to those getting payouts.

5. I don't know if you are familiar with the change for federal workers, but the federal government has already gone to a split system for its employees -- part Social Security and part 401(k) type accounts. The personal accounts receive a certain amount of matching funds and the entire fund may be invested in different types of investments and, from what I've seen, those accounts are doing quite well.

We definitely need spending cuts, but I believe moving to personal accounts is a long term solution that needs consideration. Yes, those people who are already 55 won't have the opportunity to see their fund grow very much, but I believe that their decrease in Social Security receipts won't be much different than the decrease that they will be facing if nothing is done about the Social Security time bomb.

Thanks for your article and thanks for reading my comments.
-- Jerry Gossett

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There is not enough attention given to the large amount of money that the federal government now owes the Social Security Trust Fund. Most accounts say it is in the trillions of dollars and that the system will still be short additional trillions of dollars in trying to meet future obligations after 2042 or 2052.

The system has worked well for many, many years and should not be thrown out so easily. First, small changes should be made to see how they would affect the total monies coming in and secondly, a law should be passed prohibiting further use of Social Security surpluses to pay for other special interests in the budget.

It is my belief that the real purpose of the president is to get rid of Social Security -- first by weakening it and then letting it collapse under its own weight.

We need disability benefits and widow and widower with children benefits. We don't need to have the president appeal to man's greed by saying he can build a nest egg to leave to his family. There will be no nest egg, not if one follows the rules pertaining to how the new system will work.

Thanks for listening!
-- V.A.

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Setting aside Social Security funds is a complete non starter.

Where would you put these funds? In a bank, the stock market, bonds? Unless they are invested in a way that produces real goods and services, they do nothing. Currently, the Treasury gives Social Security the trust fund bonds in exchange for the funds and this reduces current government borrowing in the financial marketplace.

But there is nothing that can be done with these funds within government that will increase the size of the economic pie in the future. Regardless of how Social Security commitments are financed, they do not increase future economic pies. If the unfunded commitments are somehow funded in the future, they only rob from workers to assure retirees of an absolute portion of pie.

The only way this total pie can be expanded is if the Social Security funds are invested in the U.S. economy. I think that is what the stock market does with our private savings. Setting the money aside now (outside of the general economy) reduces current economic real activity and does nothing to promote future real economic activity.
-- Dan Birch

[Note: I did not say the Social Security surplus should be stuffed under a mattress. I said the money should be invested. I had in mind something like a giant defined benefit plan, where institutional money managers invest the surplus for future retirees.]

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I just read your article and wanted to thank you for bringing insight and clarity to this case. What is the president thinking? Somehow there must be logic made from [their] more than misdirected proposals.

Following your advice, I have written to both Senators Boxer and Feinstein in hopes that a small flame may ignite.
-- Rae Gamble

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Why can't they give us the money we already put into Social Security and let us invest our own money?
-- R.D.G.

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Thanks for writing an article on the Social Security problem that I could finally understand. This was a great article and I agree with all the suggestions you made on ways to fix Social Security.
-- C. Lentz

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I'm a former CFP.

Your conclusions left me a bit surprised given your analysis of the situation. To say that the administration plan does nothing to solve the solvency issue simply isn't true. Especially for boomers (of which I'm one -- born in '52). It's just like prepaying a mortgage. The government owes us a bunch of money in Social Security promises (for which they don't have the ability to pay since there won't be enough workers). If they privatize part of the program, they can make a much smaller payment now to avoid the bigger payment later.

Your solutions (don't waste money and raise the upper limits) will do nothing to solve the inherent problem with the program (which you clearly recognize in your article): that it's a pay-as-you-go program.

The ONLY solution is to make it a true pension type program where money is set aside today, earns compound interest for years and then pays on retirement. That's exactly what the partial privatization does. Why not support it?
-- Gary Foreman of Stretcher.com

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.

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